The German economy experienced modest growth in the first quarter, helped by strong results in industrial production and the services sector, but rising energy prices and uncertainties related to the war in the Middle East are expected to weigh on the current quarter, the Bundesbank said on Wednesday.
Germany’s economy, the largest in the eurozone, has been stagnant for three years, and the war in Iran now jeopardizes Berlin’s hopes of reviving investment plans in infrastructure and defense to finally boost growth.
The Bundesbank highlighted that the war led to a surge in energy prices, supply problems, increased uncertainty, higher interest rates, and dimmer export prospects.
Private consumption, already weak before the conflict, took a hit in March as fuel prices reduced households’ purchasing power.
“The forecasts for exports and businesses suggest gloomier prospects,” the Bundesbank stated.
This could be due to the weight of rising energy costs and supply chain disruptions, as well as concerns about weakening global demand following the Middle East war.
(Reporting by Balazs Koranyi; Editing by Diana Mandia and Blandine Hénault)
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